U.S. Stocks Drop After Trump Tests Positive for Coronavirus

By Caitlin Ostroff and Chong Koh Ping

U.S. stocks broadly fell Friday after President Trump said he and the first lady tested positive for the coronavirus, jolting investors and adding to the political uncertainty just weeks ahead of the election.

All 11 S&P 500 sectors retreated as did 26 of the 30 stocks in the Dow Jones Industrial Average. Big tech stocks like Apple led the major benchmarks lower, while shares of Covid-sensitive businesses, including cruise-ship operators and airliners, also fell, contributing to the pullback.

The S&P 500 slid 0.7% in early-morning trading. The Dow Jones Industrial Average declined 155 points, or 0.6%, while the Nasdaq Composite fell 1%.

Investors were trying to understand the implications of President Trump's revelation that he and his wife, Melania, tested positive for the coronavirus. Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said concerns include how the government will function if President Trump's condition worsens.

Jim Baird, Plante Moran Financial Advisors' chief investment officer, said the situation raises worries of an outbreak among senior government officials.

Most important, investors are trying to determine what this means for the election, which a month away. Tom Lee, managing partner at Fundstrat Global Advisors, said in a note to clients that the news further clouds investors' outlook on the election. If President Trump's condition worsens, questions could arise around whether it is delayed or contested, Mr. Lee added.

"But this is the 'knee jerk' reaction," Mr. Lee said.

Not helping sentiment was data showing job creation slowed last month. Employers added 661,000 jobs in September, below economists' expectations of about 800,000 and the first time since April when net hiring was below 1 million.

The yield on the 10-year U.S. Treasury note edged down to 0.676%, after settling at 0.677% in the previous session. Bond yields fall as prices rise. The ICE U.S. Dollar Index, which tracks the dollar against a basket of currencies, gained 0.1%. The Japanese yen, also seen as a haven asset, gained 0.4% against the dollar.

The Cboe Volatility Index, a measure of expected swings in the S&P 500, rose 6%.

Mr. Trump and the first lady are both "well at this time," according to the White House physician. But the president's age of 74 puts him at higher risk from the virus. In the final month of the 2020 campaign, Mr. Trump will need to cancel in-person events, potentially including the next debate with Democrat Joe Biden on Oct. 15.

"It just creates a wider range of outcomes or changes the probabilities of the election," said Hani Redha, a portfolio manager at PineBridge Investments. "It injects a lot of uncertainty of how it plays out."

Mr. Biden -- who has had a lead in the polls so far -- could benefit from continuing to campaign while Mr. Trump is sidelined, if the challenger wasn't also infected at the last debate, Mr. Redha said. "If this does put Trump out of action, but not Biden, then those odds will only continue to move in that direction."

Investors are also more widely assessing the likelihood of a second wave of coronavirus infections, the probability of a contested election result, diminishing prospects for a new stimulus bill, and the pace of economic recovery.

Mr. Trump's infection has refocused attention on the possibility of another uptick in Covid-19 infections during the winter season, said Wei Li, head of iShares EMEA investment strategy at BlackRock.

"This morning, the news squarely brings us back to the fact that we are still in the middle of a crisis," Ms. Li said. "It's just making focus really go toward the Covid crisis."

New coronavirus cases in the U.S. topped 40,000 for the third day in a row. Total confirmed cases in the U.S. rose to nearly 7.28 million, while the death toll approached 208,000, according to data compiled by Johns Hopkins.

Congress is also looking increasingly unlikely to reach an agreement on the new aid package before the election. The House passed a $2.2 trillion coronavirus relief bill Thursday, but Republicans have panned the bill, giving it no chance of getting through the GOP-controlled Senate.

"Before we went into summer, I think markets were more hopeful about a fiscal stimulus continuation package going through," Ms. Li said. "The two sides are still very far apart, so I think markets are becoming more sober about the possibility we may not have an agreement."

On Thursday, travel stocks were among the biggest decliners, a sign investors expected those companies to struggle further amid signs of a resurgence of the coronavirus. Norwegian Cruise Line Holdings fell 3.5%, while Carnival slid 3.4%. Airliners including Delta Air Lines and Southwest Airlines retreated about 3%.

Some of the most influential stocks in the market on account of their size also struggled. Apple shares fell 2.3%, while Amazon.com slid 1.5%.

Investment firm Invesco, meanwhile rose nearly 7% after The Wall Street Journal reported that shareholder activist Trian Fund Management has taken big stakes in it and Janus Henderson Group and plans to agitate for deal making aimed at building a rival to the biggest asset managers in the world.

News of Mr. Trump's positive coronavirus test added to pressure on crude after heavy selling Thursday. Investors are increasingly concerned about a stalling U.S. economic recovery, rising supply from Organization of the Petroleum Exporting Countries producers and the steady drumbeat of job cuts in the energy sector, said Edward Marshall, commodities trader at Global Risk Management.

Overseas, the Stoxx Europe 600 edged down 0.3%.

Stock benchmarks in Tokyo, Australia and Singapore all fell, dropping between 0.7% and 1.4%. Markets in Shanghai, Hong Kong and South Korea were closed for holidays.

Michael Wursthorn and David Hodari contributed to this article.

Write to Caitlin Ostroff at [e-mail] and Chong Koh Ping at [e-mail]

(END) Dow Jones Newswires

10-02-20 1024ET